The BSE India Sensitive Index, or Sensex, increased 0.2
percent to 17,691.08 at the close, taking this week’s gains to
0.8 percent. The market is closed on Aug. 20 for Eid holiday.
Tata Motors Ltd. climbed for a third day after Jaguar Land Rover
sales surged 41 percent in July. Hindustan Unilever Ltd., the
biggest home-products maker, rallied to a record.

The Sensex pared gains of as much as 0.8 percent after the
state auditor said the policy of giving away coal mines without
auction may have cost the government $33 billion. The report
comes at a time when the government is battling a series of
graft charges that have slowed down decision making and impeded
reforms. Jindal Steel & Power Ltd. and Tata Power Co. paced
decline among their peers after the report.

“It will be a dangerous situation if reforms are stalled
and we lose the confidence of foreign investors,” said Deven
Choksey, managing director at K.R. Choksey Shares & Securities
in Mumbai. “The current rally has been driven by liquidity.”

Prime Minister Manmohan Singh said Aug. 15 the nation must
treat measures to boost economic growth as a matter of national
security, prompting speculation the government will increase
efforts to revive its development agenda.

Fund Flows

The Sensex has increased 15 percent this year, helped by
record overseas investor purchases. Foreign funds bought a net
$24 million of stocks yesterday, the 14th consecutive day of net
purchases, taking their investments in equities this year to
$11.4 billion, data from the regulator show. That’s an all-time
high for the period and the most this year among 10 Asian
markets tracked by Bloomberg.

Singh has struggled to salvage his reform plans as policy
gridlock over attempts to open up the economy, graft scandals
and elevated inflation deter investment. The economy expanded at
its slowest pace in almost a decade in the March quarter.

Growth may be a “little better” than last year, Singh
said Aug. 15, adding that the weakest monsoon in three years may
make it difficult to curb price increases. The economy may
expand 6.7 percent in the 12 months ending in March 2013, the
Prime Minister’s economic advisory council said today.

The Sensex advanced, tracking regional peers, amid signs
the U.S. economy is improving and as Germany signaled its
support for a European Central Bank plan to resolve the crisis.

Global Data

Applications for construction permits in the U.S. rose to
the highest since August 2008, a month before the bankruptcy of
Lehman Brothers Holdings Inc., signaling stabilization in the
housing market that triggered the crisis. German Chancellor
Angela Merkel said the ECB’s insistence on conditionality in
return for helping cut interest rates for indebted governments
matches her priorities.

“Today’s rally is on the back of improved global data,”
K.K. Mital, a fund manager at Globe Capital Market Ltd., said by
phone from New Delhi. “Liquidity is ample and that’s driving
the markets.”

India VIX, which measures the cost of protection against
losses in the S&P CNX Nifty Index, gained 0.3 percent to 15.73,
near the lowest in almost two years. The Nifty index added 0.1
percent to 5,366.30 and its August futures settled at 5,382.35.
The BSE-200 Index rose less than 0.1 percent to 2,165.91.

Tata Motors, owner of the world’s cheapest car, the Nano,
rose 2 percent to 240.2 rupees. Hindustan Unilever surged 1.8
percent to 503.4 rupees, extending its gains in the past year to
59 percent, the best performance on the Sensex. Infosys Ltd., a
software exporter, added 1.5 percent to 2,351.05 rupees.